Asset Class: Market and Economic Insights

BMO Long-Term Capital Market Assumptions

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BMO Global Asset Management seeks to provide investment solutions that achieve clients’ goals with refreshing clarity. This means offering intuitive products and services supported by rigorous analysis by our investment professionals, whose expertise underpins the value we bring to clients. Data may be impersonal, but insight is not.

The following paper outlines our Capital Market Assumptions (CMAs) over a 10-year time horizon. Our strategists update the CMAs annually using proprietary models along with input from our global team of investment professionals.

By providing the rationale for our strategic asset allocation across equities, fixed income and alternatives, CMAs support BMO Global Asset Management’s overall approach to multi-asset investment. We use these assumptions to offer a variety of portfolio construction options to clients, enabling them to better understand risk/return expectations and enabling us to tailor solutions to more refined objectives.

In addition to traditional mean-variance optimization, the team uses other modern techniques such as mean/conditional-value-at-risk (mean-CVaR) optimization to evaluate the effects of allocation constraints on expected returns and risks. To build a realistic range of potential outcomes, our team uses the Monte Carlo methodology to generate thousands of return simulations for each asset class. Furthermore, they expand the analysis to capture the effects of different correlation regimes on asset allocation outcomes and to evaluate each allocation’s downside risk exposure.

Our CMAs offer a global satellite view of the investing environment. Whether investors are seeking income, capital appreciation or the ability to meet liabilities or spending targets, our investment professionals use this perspective to help clients visualize a roadmap to their goals.

 
Download the 2019 BMO Long-Term Capital Market Assumptions

 

Prepared by:

Yung Yu Ma circle headshot
Yung-Yu Ma, Ph.D.
Chief Investment Strategist
BMO Wealth Management
Irina Pacheco circle headshot
Irina Pacheco, CFA®
Quantitative Strategist and Portfolio Manager – Multi Assets Solutions
BMO Global Asset Management

 

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

 

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